The shadow of tariffs is gradually dispersing as Wall Street giants collectively sing the praises of the credit market.

After achieving breakthrough progress in the China-US trade negotiations, Wall Street credit analysts, including Goldman Sachs, are re-adjusting their full-year forecasts, turning more optimistic towards market prospects. Strategists from Goldman Sachs, Barclays, and JPMorgan Chase stated that the rapid rise of risk assets has pushed up corporate bond valuations across the board, attracting a large number of borrowers to enter the market, prompting them to adopt a more bullish market view. Barclays strategists Bradley Rogoff and Dominique Toublan wrote in their latest forecast report released on Wednesday, "We view the easing of trade tensions over the weekend as a significant and enduring shift in the economic backdrop. In the short term, the path of least market resistance will be further narrowing of spreads." Analysts' latest forecasts show that investment-grade bond spreads (the additional yield required by investors holding corporate bonds rather than government bonds) are expected to close at the lower limit of 95 basis points by the end of the year, a 25 basis point decrease from the March forecast. For high-yield bonds, Barclays expects spreads to close at 325 basis points by the end of 2025, a 75 basis point decrease from the previous estimate. The bank now expects the Trump administration to impose tariffs on U.S. trading partners in a milder manner than signaled by the White House last month. Barclays stated that this will alleviate inflation and employment pressures while maintaining positive economic growth this year. The report noted that corporate balance sheets are relatively healthy, and the still high yields will continue to support bond demand. Goldman Sachs currently predicts that the risk premium for U.S. investment-grade bonds will narrow by approximately 20 basis points by the end of the year, compared to the March forecast, while high-yield bond spreads will narrow by about 100 basis points, with both experiencing minimal changes from current levels. "The signals sent in recent weeks are clear: the policy shift that initially pushed up risk premiums has softened, acting as a circuit breaker - with a more significant impact than we expected," wrote Lotfi Karoui, Chief Credit Strategist at Goldman Sachs in a report on Tuesday. JPMorgan Chase also expects junk bond spreads to narrow by the end of the year compared to their April 11 forecast, but still remain higher than current levels. Strategist Nelson Jantzen stated that the most severe phase of "policy chaos" may have passed, but he added that tariff uncertainty will persist, leading to rising unemployment rates and slower growth. In the first two trading days of the week, investment-grade bond spreads narrowed by 8 basis points, marking the largest two-day decline since March 2023; while on Monday, junk bond spreads saw the largest decline since November 2020.